Natural gas trading outlook: futures slide ahead of EIA report

Natural gas futures gave back some of Wednesdays gains during early trade in Europe today, as investors eye the weekly US natgas storage build report. Weather patterns remain bearish in the short term, though indications of some cool early in October stoke some early heating hype.

Front-month natural gas futures for settlement in October on the New York Mercantile Exchange traded at $3.865 per million British thermal units (mBtu) at 9:19 GMT, down 1.18% for the day. Prices ranged from $3.859 to $3.900 per mBtu. The contract added 2.49% on Wednesday.

“There could have been many reasons for the late rise yesterday, such as positioning going into today’s weekly EIA report, or the coming expiration of the October contract,” analysts at NatGasWeather.com wrote in a note to clients today. “Markets are again in a very interesting position where prices can spring 5-10¢ in either direction depending on if the weekly build meets the 95-98 Bcf estimate.”

The Energy Information Administration (EIA)s weekly natgas storage report was on central stage today. Analysts expect a build of just under 100 billion cubic feet be logged for the week through September 19th. The next two weeks, however, will most probably see builds in the triple digits, as Fall shoulder season kicks in high gear.

Investors are closely monitoring a southbound cool Canadian system, due to reach the US in early October. The initial blast will be over low-natgas use states, though by the 6th the system will have moved over the Midwest, and the Northeast later on, adding to the possibility of sizable heating demand.

“This [system] most certainly will ease bearish weather headwinds, and depending on how sensitive the markets are to coming cold weather patterns, it could entirely erase them,” NatGasWeather.com analysts wrote. “If the colder [pattern] solutions were looking more convincing, it might be time to look for a buying opportunity. But they are not, and so we will be patient over the next few days.”

US weather outlook

Meteorologists see strengthening high pressure over the southern US, already breaking into the Midwest and Northeast. As a result, temperatures across the regions will be rising to quite comfortable, allowing for bumper natgas builds in the following weeks. The West will have a cooler weekend, as offshore systems draft clouds and rains inland, cooling California and the region after the recent hot spell. Overall, US temps will be quite pleasant, with little of either cooling or heating.

New York is having a moody Thursday, with pouring rains and winds, AccuWeather.com reported, with temperatures at 56-64 degrees Fahrenheit, a few below average. The weather will turn around tomorrow, however, as temps rise some 10 degrees, and by the weekend it will be quite warm with highs in the 80s and plenty sun. Chicago will have an extended period of normal, and pleasant, weather as temps range high 50s to about 70 through to late next week.

Down South, Houston is also set for some rains and winds today, with temperatures a few below average at 70-82. Readings will climb to normal tomorrow, and the weekend will be mostly sunny with highs at the mid 80s. Over on the West Coast, Los Angeles will be warmer than usual today, highs up to 87. Low clouds will lower readings to just below normal tomorrow, while the weekend will be even cooler, with highs in the mid-to-upper 70s.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, October natural gas futures’ central pivot point stands at $3.876. In case the contract penetrates the first resistance level at $3.957 per million British thermal units, it will encounter next resistance at $4.002. If breached, upside movement will probably attempt to advance to $4.083 per mBtu.

If the energy source drops below its first support level at $3.831 per mBtu, it will next see support at $3.750. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.705 per mBtu.